More, later! STOCHASTIC-MA strategy coming soon.
So basically you’re just saying that price oscillates around the average?
There’s a secret ??? How come no-one told me ??
Technically speaking, a moving average represents the average price level for a giving range(domain). Therefore, it is obvious that price oscillates around the graph of a given MA.
But, let us look at it this way: Instead of trying to forecast the direction of price, FORECAST the direction of the MA that best fits the given period!
Afterall, it represents the current market dynamics! Why is this a good approach?
(I): A good MA( higher range) will have infrequent turning points! On the other hand, price has a large number of turning points within a given interval!
(II): BigMoney trades by ZONAL-MARKING! BigMoney is not interested in the Actual price(at time t) but the AVERAGE PRICE for a given period!
To explain this further,
Let me present a simple model.
Suppose you have the power to move price +/-5pips on any day of the month and BigMoney has the power to move price +/-200pips and the rest of humanity +/-30pips.
Suppose further that the current price level is 1.3452 and the 200EMA is flat within the interval (1.3440, 1.3590). For any single day, you and the rest of humanity cannot change the slope of the MA much. As long as BIGMONEY is ok with the CURRENT AVERAGE price, you and the rest of humanity will keep price dancing around the MA.
However, as time increases, your net effect on the MA will start to increase and without loss of genrality, you may cause the slope of the MA to increase, therefore pushing the AVERAGE price out of the range that suits BigMoney.
If BIgMoney is ok with your little game, it will help increase the Average price(and thus the gradient of the MA) further by supporting your actions. On the other hand, If it is not in BigMoney’s interest, It will put presuure on the MA(AVERAGE PRICE) so that it falls back into the desired zone!
BigMoney is not interested in the little disturbances around The MA, as long as those disturbances do not send the wrong signal to the market.
BigMoney can be likened to the Chines govt, relative to the chinese currency!
The govt determines the average exchange rate of the yuan relative to the dollar say, keeping it within a tight interval. Because we know this, we can be sure that: if we pay attention to the average price that suits the chinese govt, we can predict fairly what price will do.
BigMoney is the Chinese govt in the free forex world! Know the direction BigMoney supports. Find that elusive AVERAGE PRICE GRAPH (MA) and you will figure out what price must do!
Anyway, once again, A CONTRADICTION has been created on the USDCHF 5MINS chart!!!
Price must fall below 0.8951 in order to create a yellow dot below the first blue dot and keep the gradient of the MA negative!
